IBM Acquires Apptio for $4.6 Billion in Cash to Boost Cloud and Automation Capabilities
IBM has announced that it will acquire Apptio, a technology spend-management platform, from Vista Equity Partners for $4.6 billion in cash. The acquisition is aimed at bolstering IBM’s capabilities in cloud and automation, and will benefit its Red Hat business, AI portfolio, and consulting business. Apptio is a software-as-a-service business with over 1,500 customers and partnerships with cloud companies from Amazon’s AWS to Salesforce. IBM expects the deal to close in the latter half of 2023, and will finance the transaction with cash on hand.
The acquisition comes as companies are cutting their technology budgets amid challenging macro conditions, and IBM is reorienting itself to focus on newer AI and cloud-based offerings. The company cut about 3,900 jobs early this year and reported under 1% year-over-year increase in revenue in the March quarter. The deal reflects IBM’s opportunistic approach to M&A, and the company is looking for opportunities in the software and consulting space.
Seattle-based Apptio helps companies manage and understand their spending on cloud services, offering functionalities such as IT budgeting, forecasting, and financial analyses. Apptio’s revenue was about $233 million in 2018 and is expected to have grown 11%-13% compounded annually through fiscal year 2022, according to analysts at UBS. Private equity firm Vista Equity Partners took Apptio private in a $2 billion deal in 2019, about three years after the software company had gone public.
IBM’s acquisition of Apptio follows its 2019 purchase of software provider Red Hat for about $34 billion, its biggest acquisition ever. In 2021, the company spun off its IT infrastructure and data-center business Kyndryl Holdings. Last year, IBM closed the sale of some of its healthcare-data and analytics assets.
Shares of IBM were marginally lower in premarket trading as the market digested the news.
(Source: Reuters)
**Key Takeaways:**
– IBM will acquire technology spend-management platform Apptio from Vista Equity Partners for $4.6 billion in cash to bolster its capabilities in cloud and automation.
– The deal is expected to benefit IBM’s Red Hat business, AI portfolio, and consulting business, and will finance the transaction with cash on hand.
– Apptio’s revenue was about $233 million in 2018 and is expected to have grown 11%-13% compounded annually through fiscal year 2022.
– The acquisition reflects IBM’s opportunistic approach to M&A, and the company is looking for opportunities in the software and consulting space.
– IBM’s acquisition of Apptio follows its 2019 purchase of software provider Red Hat for about $34 billion, its biggest acquisition ever.
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